The Statute of Collections

John, a white man with brown hair and blue eyes, wears a blue jacket, white shirt, and blue tie. By John G. Hodnette

Section 6501 provides the statute of limitations for the IRS to assess additional tax. Equally important is Section 6502, which provides the statute of collections (sometimes referred to as the collection statute expiration date or “CSED”). The statute of collections generally provides the IRS must collect a tax within 10 years of assessment.

The CSED permits a tax to be collected by levy or a court proceeding only if the levy is made or the proceeding had begun before the CSED. Section 6502(b) provides the date on which a levy is made is the date the notice of seizure is provided to the taxpayer as required by Section 6335(a).  As to a seizure that is made by court order, the proceeding begins upon the filing of the IRS’s suit against the taxpayer. The statute of collections does not expire after the proceeding is concluded until the tax is satisfied or the judgment becomes unenforceable. Thus, the CSED cannot be used to defeat the IRS’s right to collect a judgment entered by a court.

Although the general rule is the CSED is 10 years from the assessment of the tax, there are a few exceptions. Section 6502(a)(2)(A) provides where the taxpayer has entered into an installment agreement, the statute of collections is 90 days after the expiration of the period for collection agreed upon in writing by the taxpayer and the IRS rather than the normal ten years.  Additionally, Section 6502(a)(2)(B) provides the statute of collections runs if there is a release of levy pursuant to Section 6343 that occurs after ten years from assessment but before the expiration for the period of assessment agreed by the taxpayer and the IRS.

Certain actions pause the statute of collections, including periods for which installment agreements, offers in compromise, and collection due process hearings are pending. Other events, such as the bankruptcy of the taxpayer and the taxpayer’s being outside of the United States for long periods, also pause the statute of collections. Finally, although somewhat rare, the IRS has the ability to file an action in court before the expiration of the CSED requesting an extension of time to collect.

John G. Hodnette is an attorney with Johnston, Allison & Hord in Charlotte.